The Working Mechanism of a Holding Company

The offshore industry prevailing around the world is a vast spectrum that involves multiple segments. These segments are mostly opted by high-net-worth-individuals and multi-national companies to invest or save themselves from paying a high-end tax amount. One of the widely chosen options is investing in a holding company, which is a legal business entity that focuses on holding ownership in other companies.

Now, if you are a business investor looking forward to investing in a holding company, then it becomes essential for one to understand the core reasons of investing into a holding company, along with the working mechanism. Holding a knowledge on the same will help you to channelize the growth prospects to the next level. This guide presents the working model of a holding company, which will help you to understand the mechanism at ease. Let’s start with the basics.

What is a Holding Company?

A holding company is a legal business model that gets incorporated to hold business shares of other business entities to manage and control the entities. Investing in a holding company also fetches out opportunities to save tax to a great extent. When it comes to owning assets, a holding company has got the below list:

  • Shares of stock in a corporation
  • Securities such as bonds, mutual funds, etc.
  • Intangible assets like patents, copyright, trademarks, and trade secrets
  • Real estate
  • Number of a subsidiary company (can be in one or more industries)

While proceeding forwards the holding company formation, it is essential to understand that one needs to select a suitable offshore jurisdiction to proceed with.    

Relationship Between a Subsidiary and Holding Company

As per the stated guidelines, the relationship between a subsidiary and holding company gets established:

  • If the holding company can control the Board of Directors of the subsidiary company
  • If the holding company holds more than 50% of the total share capital of the Subsidiary company

How Does a Holding Company Work?

According to the legal guidelines, it is to be noted that a holding company can hold the shares of a subsidiary company in both direct and indirect ways. For example:

  1. If holding company X holds a subsidiary Y
  2. Subsidiary Y holds another Subsidiary unit Z
  3. The holding company X holds control over unit Y and Z.

A better example of the working mechanism can be understood with the help of the diagram stated below.

How to Start a Holding Company?

To proceed ahead with the incorporation of a holding company, one has to go through the following steps:

1.Select a Certified Business Expert

A well-experienced and certified business expert can help you to sort the process at ease. Experts like Business Setup Worldwide can help you to deal with the offshore incorporation phase in a tax-haven jurisdiction in a hassle-free way.

2.Be Handy with the Documents

The next phase deals with documentation as it serves the ground of company incorporation. One needs to make sure to hold the essentials like:

  • Company incorporation application form
  • Memorandum and Articles of association
  • Well-drafted business plan
  • Identity and address proof of the company shareholders
  • Relevant company incorporation fee

3.Submit and Get the Documents Verified

Once the company documents are ready, they are to be handed over to the business experts that will undergo the verification process. The scrutiny will be carried out by the respective government authorities.

4.Proceed with the Offshore Bank Account

Lastly, one needs to deal with an offshore bank account to carry out the relevant transactions.

Now, you have clearly understood the base that needs to be built to incorporate a holding company and then carry out the relevant activities accordingly. Now, it becomes challenging for a business investor to carry out the process if he/she is not aware of the legal process that needs to be initiated at an early stage. This involves the part of document submission to grabbing the permission from the relevant authorities. Proceeding ahead with business experts turns out to be a feasible option based on the following grounds:

  • The legal processes get sorted easily
  • Offshore company incorporation process becomes hassle-free
  • The market details can be easily known with the help of experts
  • Saves time to a great extent

To understand in an in-depth manner, do go through our latest guide on Four Core Reasons to Hire an Offshore Business Consultant.

At Business Setup Worldwide, we provide the best and feasible solutions to business investors to set up their company at ease. With a team of experts, we take the ultimate initiative of providing the feasible offshore business incorporation by providing tailored solutions suiting the business needs. If you are planning forward to invest in a holding company, feel free to have a word with our business experts. Contact us today-we’d be glad to assist.

 

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